What Indonesia’s new rules on foreign control mean for fintech firms

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Hello readers,

One thing about living in a pandemic is that I’ve come to terms with all the uncertainty. Who knows how many cases we’ll be seeing next? Will we be back in lockdown next week? What will the restrictions look like in a month? Things are constantly changing, and we just need to roll with the punches.

The same applies to businesses. Regulations and guidelines can change pretty swiftly – as Indonesia’s fintech firms have found. With the country’s new rules around foreign ownership and control that have come up, fundraising and negotiating shareholder agreements may become much trickier.

Today we look at,

• The impact of Bank Indonesia’s latest regulations on Indonesia’s digital payment firms
• What fresh funding will do for this Malaysian insurtech startup
• Other newsy highlights such as Vertex Venture’s next fund and Entrepreneur First’s latest investments in India

PREMIUM SUMMARY

Fintech and foreign control in Indonesia

It’s been a bumpy road for digital payments firms in Indonesia, as mergers and potential acquisitions have led to numerous shifts in the landscape. And the latest twist to the tale – Bank Indonesia’s new regulations on shareholder control – is complicating things even further.

• Keeping things local: The new rules, which are part of Indonesia’s protectionist policies to protect and empower domestic companies to boost the local economy, cap foreign shareholder control in “front-end” payment businesses to only 49%. This guarantees that payment companies are controlled by local shareholders. The rules also strip board appointment rights and veto rights from foreign shareholders.
• Money and control: While the rules allow for companies to have up to 85% foreign ownership, voting rights must remain at a maximum of 49%. This would be a huge deterrent to foreign shareholders, who would want control over decisions to go along with majority ownership, and affect the fundraising potential of these startups.
• The silver lining: While strict, the new regulations could open up opportunities for local players, as well as attract committed players from abroad who would welcome clearer guidelines and regulations. Only time will tell how things will pan out.

Read more: Indonesia fintech hits hurdle with new rules on foreign control

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